Modern around-the-world-actual-time communications never cease to amaze me!
Watching the Fur Rondy Sprint Sled Dog races in downtown Anchorage here and here.
Watching the Hawaii itsunami as the result of the earthquake in Chile here.
I am so glad I have the “pioneer blood” running through my veins that brought me to Anchorage all these many years ago. It’s a great place to live.
Last night thanks to the Anchorage Concert Association (an important part of my life since first arriving), L & I had a great evening of entertainment at ACA’s presentation of Chicago.
I want to be able to enter a room like Velma ala All That Jazz.
We are gearing up for the Fur Rendezvous activities this weekend—the parade, Running of the Reindeer, Native Arts Market, etc.
Today, 6 inches of lovely new snow is falling. We really needed it for the Fur Rendezvous Sled Dog Sprint race tomorrow, Saturday, and Sunday. We are once again clean, white, and fluffy.
Thanks to IBD (Investors Business Daily) I can see—visually and understand—that the S&P 500 ETF performed better year-to-date than other benchmark ETFs around the world. I wasn’t thrilled by the -0.05% gain/loss until I looked at France and Germany. I’ll take the U.S.
Deciding to sell is often more difficult than deciding to buy. No unconditional rules nor guarantees exist for determining when to sell. Undoubtedly, the stock will go up after you sell, but if you keep it, it will go down. Buying a stock at its low and selling it at its high is mere luck. It rarely happens, but when it does, it creates a feeling of expertise. Don’t despair nor chase rainbows. You can make a great deal of everyday money by leaving the top 15 percent and the bottom 15 percent for other investors and taking the 70 percent in the middle. Of course, you still have to decide when to sell to capture the middle 70 percent of the price increase. In the absence of retroactive investing, the following three sound reasons for selling can guide your decision making:
1. Sell to correct a mistake.
2. Sell to exit a deteriorating company.
3. Sell to take a profit.
Correct a Mistake
Admitting a mistake and selling a stock can be difficult to do. One tends to put off taking that step. But after all, you analyzed the company with past data, not a crystal ball. Acknowledge the misstep—yours or the company’s—and sell. Don’t wait for the flaw to fix itself. When egos and emotions get in the way, little slips turn into huge falls. Take losses while they are small. A 12 to 15 percent loss will not ruin your portfolio. However, a 30 to 50 percent loss can seriously damage it. The four most overused investment words are, “It will come back.” The reality of percentage decreases versus increases is that a 25 percent decline requires a 33 percent increase to break even. A 50 percent decline requires a 100 percent increase to break even. Will the stock’s price go up 100 percent just to get you back where you started? Rarely. Prosperity is taking losses while they are small. You are a more successful investor after you have taken the loss and reinvested the remaining funds. Selling your losers is like weeding your garden.
Exit a Deteriorating Company
Sell when you see signs of company weakness despite a good economy. The following are indications the company may be having difficulty:
• a decrease in the earnings-per-share, revenue, and dividend growth rates;
• a decrease in earnings for two consecutive quarters;
• a decrease in the profit margin (Company costs have gone up.);
• a decrease in the company’s fundamentals (They have fallen below the industry average or below those of similar companies.);
• an increase in the accounts receivable growth rate compared with the revenue growth rate (The company may be concentrating on moving goods out the door by easing credit, giving incentives for buying now, and using hard-sell tactics. Purchasers may return these goods.);
• an increase in the inventory growth rate compared with the revenue growth rate (The company may be stuck with goods it can’t sell. The company may have to reduce prices or write off the inventory. Both actions will decrease earnings and profit margins.);
• a downgrading of the company’s debt rating;
• an increase in the debt-to-equity ratio without profitable acquisitions or expansion;
• a change in the economic cycle and both the company and industry are declining;
• a shareholder class action law suit has been filed against the company;
• an SEC investigation has been initiated.
If the signs of trouble appear to be longer-term—more than a year—sell and invest in another company. If the company is no longer the good company you bought due to poor management, the economy, or problems within the industry, sell the stock and reinvest your money in another quality company.
Take a Profit
Sell a stock to take a profit:
• its price has reached the upside target you set at the time of purchase.
• you have doubled your profits within six months.
Sell a stock when it becomes significantly overpriced:
• the stock’s p/e is above its 10-year high.
• the stock’s p/e is three or four times the company’s 5-year earnings growth rate.
Summary
The decision to sell a stock can be difficult to make because your ego and emotions are often part of the decision. Yet, ignoring a deteriorating stock and making no decision may be a negative decision by default. Prosperity is taking losses while they are small. Be pro active. Set your emotions aside and sell if you need to correct a mistake, if the company is deteriorating, or if it is time to take a profit. Step forward to success.
I’ve finished teaching my last investment class for the semester:
The Stock Market Game: Introduction to Stocks
This course is designed to introduce valuable concepts related to stocks, the stock market and the use of the Stock Market Game program in grades 4 through 12. Teachers will become acquainted with economic and stock market concepts, such as competition, compounding, company profit, capital acquisition, supply and demand and forms of business ownership. This class will give teachers specific ideas for correlating economic and financial and market concepts with educational standards across curriculum lines in the use of the Stock Market Game Program. You will receive a $40 rebate at the end of the semester if you actively use the Stock Market Game in your classroom with at least 3 student teams. Register for free student teams at www.StockMarketGame.org. Nancy King, Instructor Nanking@gci.net.
NOW, its time to not only update my To Do list, but also look at it and act on it!!!! How many days does it take to shift gears? Please, no one needs to answer that question.
The following is thanks to an Econ friend who provided chuckles this morning while I was trying to finish the handout booklet for next week’s Introduction to Stocks class.
DEMOCRAT
You have two cows.
Your neighbor has none.
You feel guilty for being successful.
You push for higher taxes so the government can provide cows for everyone.
REPUBLICAN
You have two cows.
Your neighbor has none.
So?
SOCIALIST
You have two cows.
The government takes one and gives it to your neighbor.
You form a cooperative to tell him how to manage his cow.
COMMUNIST
You have two cows.
The government seizes both and provides you with milk.
You wait in line for hours to get it.
It is expensive and sour.
CAPITALISM, AMERICAN STYLE
You have two cows.
You sell one, buy a bull, and build a herd of cows.
BUREAUCRACY, AMERICAN STYLE
You have two cows.
Under the new farm program the government pays you to shoot one, milk the other, and then pour the milk down the drain.
AMERICAN CORPORATION
You have two cows.
You sell one, lease it back to yourself, and do an IPO on the 2nd one.
You force the two cows to produce the milk of four cows.
You are surprised when one cow drops dead.
You spin an announcement to the analysts stating you have downsized and are reducing expenses.
Your stock goes up.
FRENCH CORPORATION
You have two cows.
You go on strike because you want three cows.
You go to lunch and drink wine.
Life is good.
JAPANESE CORPORATION
You have two cows.
You redesign them so they are one-tenth the size of an ordinary cow and produce twenty times the milk.
They learn to travel on unbelievably crowded trains.
Most are at the top of their class in cow school.
GERMAN CORPORATION
You have two cows.
You engineer them so they are all blond, drink lots of beer, give excellent quality milk, and run a hundred miles an hour.
Unfortunately they also demand 13 weeks of vacation per year.
ITALIAN CORPORATION
You have two cows but you don’t know where they are.
You break for lunch.
Life is good.
RUSSIAN CORPORATION
You have two cows.
You drink some vodka.
You count them and learn you have five cows.
You drink some more vodka.
You count them again and learn you have 42 cows.
The Mafia shows up and takes over however many cows you really have.
TALIBAN CORPORATION
You have all the cows in Afghanistan, which are two.
You don’t milk them because you cannot touch any creature’s private parts.
You get a $40 million grant from the US government to find alternatives to milk production but use the money to buy weapons.
BELGIAN CORPORATION
You have one cow.
The cow is schizophrenic.
Sometimes the cow thinks she’s French, other times she’s Flemish.
The Flemish cow won’t share with the French cow.
The French cow wants control of the Flemish cow’s milk.
The cow asks permission to be cut in half.
The cow dies happy.
